Trends, like horses, are easier to ride in the direction they are going

2050 Hindsight. Trends, like horses, are easier to ride in the direction they are going - John Naisbitt, Megatrends, 1982 CFA Society San Diego Lawrence Speidell Chief Investment Officer, CEO Frontier Market Asset Management larry@frontiermkt.com December 2013

2 Dhaka, Bangladesh

3 Erbil, Iraq

4 Maputo, Mozambique

Today s World

World Wealth www.worldmapper.org

Today s World Source: databank.worldbank.org, world-development-indicators, WDI1205, WDI Ranks 130724 7

GDP Growth Economic Growth in Frontier & Emerging Economies is High Source: IMF, Jan 2012 8

Demographics Bangladesh: Population 150 million 81,508 primary schools 16.5 million students 361,000 teachers (43% female) student teacher ratio of 46. Photo: Frontier Market Asset Management, 2010

Population Now and 2300

Demographics. 2011 2025 Population Growth Rate Bulgaria 7.7 7.1-0.6% Ukraine 46.7 43.2-0.6% Belarus 9.8 9.1-0.5% Moldova 3.6 3.4-0.5% Georgia 4.3 4.0-0.5% Lithuania 3.4 3.1-0.5% Russia 144.1 136.5-0.4% Malawi 16.2 23.3 2.6% Occupied Palestine 4.6 6.6 2.7% Somalia 9.6 14.0 2.7% Benin 9.5 13.8 2.7% Tanzania 46.6 67.7 2.7% Burkina Faso 16.8 24.9 2.8% Afghanistan 30.2 45.1 2.9% Uganda 35.0 53.6 3.1% Niger 16.5 27.4 3.7% 11

Demographics - Favor the Developing Countries. Age > 64 20 18 16 14 12 10 8 6 4 2 0 Italy Japan Germany Greece Bulgaria Romania Poland Singapore Population Demographics China Ireland Bahrain UAE Argentina Sri Lanka Vietnam Peru Pakistan Developed Markets Emerging Markets Frontier Markets Zambia Uganda Nigeria 0 10 20 30 40 50 60 Age < 15 FrontierCountries0607 Source: World Development Indicators, 2006

Demographics China versus India Today 100+ China 2011 Population 1,385,864 100+ India 2011 Population (000) 1,240,387 95-99 90-94 85-89 Females Males 95-99 90-94 85-89 Females Males 80-84 80-84 80+ 80+ 75-79 75-79 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 (80,000) (40,000) - 40,000 80,000 Source: United Nations Population Prospects, 2009 (80,000) (40,000) - 40,000 80,000

Demographics China versus India in 2050 100+ China 2050 Population 1,536,074 100+ India 2050 Population 1,663,998 95-99 90-94 85-89 Females Males 95-99 90-94 85-89 Females Males 80-84 80-84 80+ 80+ 75-79 75-79 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 (80,000) (40,000) - 40,000 80,000 Source: United Nations Population Prospects, 2009 (80,000) (40,000) - 40,000 80,000

Demographics: Japan Now & 2050 100+ 95-99 90-94 85-89 80-84 80+ 75-79 70-74 65-69 60-64 55-59 Females Males Japan 2011 Population 137,002 100+ 95-99 90-94 85-89 80-84 80+ 75-79 70-74 65-69 60-64 55-59 Females Males Japan 2050 Population 120,721 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 (10,000) (5,000) - 5,000 10,000 (10,000) (5,000) - 5,000 10,000

Demographics: U.S. Now & 2050 100+ United States of America 2011 Population 335,705 100+ United States of America 2050 Population 444,168 95-99 90-94 85-89 Females Males 95-99 90-94 85-89 Females Males 80-84 80-84 80+ 80+ 75-79 75-79 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 (20,000) (10,000) - 10,000 20,000 (20,000) (10,000) - 10,000 20,000

Demographics: Nigeria Now & 2050 100+ Nigeria 2011 Population 162,394 100+ Nigeria 2050 Population 291,619 95-99 90-94 85-89 Females Males 95-99 90-94 85-89 Females Males 80-84 80-84 80+ 80+ 75-79 75-79 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 (20,000) (10,000) - 10,000 20,000 (20,000) (10,000) - 10,000 20,000

Demographic Destiny - Productivity, Dependency & Maturity

Productivity Employed, 55 59 Employed, 60 64 Employed, 65 69 Employed, 70+ United States 66% 43% 20% 5% Germany 61% 23% 3% 0% Italy 26% 12% 1% 0% Spain 46% 22% 0% 0% Cambodia 16% 1% 0% 0% Productivity Estimates Age US N. Europe S. Europe Japan China India Emerging Frontier PoorFrontier 10-14 0% 0% 0% 0% 0% 0% 5% 5% 20% 15-19 10% 10% 10% 10% 40% 40% 40% 40% 70% 20-24 50% 50% 50% 50% 80% 80% 80% 80% 95% 25-29 75% 75% 75% 75% 100% 100% 100% 100% 100% 30-34 90% 90% 90% 90% 100% 100% 100% 100% 100% 35-39 100% 100% 100% 100% 100% 100% 100% 100% 100% 40-44 100% 100% 100% 100% 100% 95% 95% 95% 95% 45-49 100% 100% 100% 100% 95% 90% 90% 90% 90% 50-54 100% 100% 60% 100% 90% 80% 80% 80% 50% 55-59 90% 80% 40% 90% 70% 50% 50% 50% 20% 60-64 70% 50% 10% 70% 40% 25% 25% 25% 10% 65-69 20% 5% 2% 20% 5% 5% 5% 5% 0% >70 5% 0% 0% 5% 0% 0% 0% 0% 0% Source: FMAM estimates, OECD 21

22 Productivity

23 Productivity

24 Productivity

25 Productivity

Productivity Population (000) Productivity Envelope. Mil Hrs 2011 2050 % Chg 2011 2050 % Chg Africa Malawi 15,381 49,719 223% 9,824 35,939 266% Africa Zambia 13,475 45,037 234% 8,606 30,850 258% Africa Uganda 34,509 94,259 173% 21,379 73,648 244% Africa Nigeria 162,471 389,615 140% 111,129 302,683 172% Africa Rwanda 10,943 26,003 138% 7,665 20,612 169% Africa Senegal 12,768 28,607 124% 8,809 23,560 167% Africa Kenya 41,610 96,887 133% 29,310 76,939 163% Africa Mozambique 23,930 50,192 110% 15,957 40,963 157% Africa Côte d'ivoire 20,153 40,674 102% 14,097 33,815 140% Africa Ghana 24,966 49,107 97% 18,436 40,423 119% Africa Zimbabwe 12,754 20,614 62% 9,173 18,000 96% Asia Pakistan 176,745 274,875 56% 136,572 238,903 75% Mid East Jordan 6,330 9,882 56% 4,835 8,436 74% Lat Am Paraguay 6,568 10,323 57% 5,149 8,554 66% E Europe Romania 21,436 18,535-14% 19,067 12,787-33% E Europe Ukraine 45,190 36,074-20% 40,151 26,005-35% E Europe Georgia 4,329 3,186-26% 3,743 2,238-40% E Europe Bulgaria 7,446 5,459-27% 6,360 3,680-42% 26

27 Productivity Population (000) Productivity Envelope. Mil Hrs 2011 2050 % Chg 2011 2050 % Chg Developed Australia 22,606 31,385 39% 18,579 22,572 21% Developed United States 313,085 403,101 29% 265,731 308,671 16% Developed Canada 34,350 43,642 27% 29,357 31,488 7% Developed United Kingdom 62,417 72,817 17% 50,440 52,614 4% Developed France 63,126 72,442 15% 50,139 50,729 1% Developed Spain 46,455 51,354 11% 40,646 33,686-17% Developed Greece 11,390 11,647 2% 9,688 7,937-18% Developed Italy 60,789 59,158-3% 50,894 38,806-24% Developed Germany 82,163 74,781-9% 68,988 49,886-28% Developed Portugal 10,690 9,379-12% 9,074 6,263-31% Developed Japan 126,497 108,549-14% 83,633 56,227-33% Emerging Philippines 94,852 154,939 63% 73,437 128,661 75% Emerging Israel 7,562 12,029 59% 5,861 9,057 55% Emerging Egypt 82,537 123,452 50% 66,337 101,176 53% Emerging Malaysia 28,859 43,455 51% 23,861 35,218 48% Emerging India 1,241,492 1,692,008 36% 1,065,014 1,518,598 43% Emerging Peru 29,400 38,832 32% 24,025 31,472 31% Emerging Colombia 46,927 61,764 32% 39,248 49,182 25% Emerging Mexico 114,793 143,925 25% 94,912 113,298 19% Emerging South Africa 50,460 56,757 12% 41,923 49,417 18% Emerging Turkey 73,640 91,617 24% 64,141 72,613 13% Emerging Indonesia 242,326 293,456 21% 212,519 232,784 10% Emerging Brazil 196,655 222,843 13% 171,271 171,795 0% Emerging Chile 17,270 20,059 16% 14,985 14,894-1% Emerging China 1,347,565 1,295,604-4% 1,237,559 1,053,433-15% Emerging Thailand 69,519 71,037 2% 62,701 52,168-17% Emerging Hungary 9,966 9,243-7% 8,517 6,611-22% Emerging Poland 38,299 34,906-9% 34,007 24,129-29% Emerging Russia 142,836 126,188-12% 130,098 91,417-30% Emerging S. Korea 48,391 47,050-3% 44,583 30,479-32%

Opportunity - Wages Labor Cost $/hour $/month Bangladesh $0.23 $37 India $0.51 $82 Pakistan $0.41 $66 China $1.08 $173 Source: Citi Brokerage, 2013 250 Competitive advantage Average monthly wages*, $ 200 150 100 50 0 1992 1994 1996 1998 2000 2002 2004 2006 Thailand China Vietnam Source: EIU, * excluding social security Source: 28 Lockheed Corporation

Opportunity - Education Strathmore University, Nairobi

Source: Breakout Nations, Sharma, 2012 Missed Opportunity - Inequality

Opportunity - Middle Class in Africa 32 Source: The Economist, Oct 4, 2012 Bashundara City Mall, Dhaka, Bangladesh

Opportunity - Middle Class in Bangladesh Bashundara City Mall, Dhaka, Bangladesh 33

$2,000 to $12,000 is the sweet spot for consumption (Penetration of durable goods relative to annual income) $2,000 = 15,000 RMB $12,000 = 90,000 RMB

35 Opportunity - Middle Class Spending

2050 Hindsight Government

Veto Points Source: Veto Players, Tsebelis, 2001

Culture? Trust is related to income and cultural history Democracy & Trust, Mark Warren, 1999

World Values Survey, 2008 Culture?

Heritage Foundation Economic Freedom Rank BUSINESS FREEDOM Starting a business procedures (number), time (days), cost (% of income per capita), minimum capital (% of income per capita) Obtaining a license procedures (number), time (days), cost (% of income per capita) Closing a business time (years), cost (% of estate), recovery rate (cents on the dollar) TRADE FREEDOM The trade-weighted average tariff rate Non-tariff barriers: quantity restrictions, price restrictions, regulatory restrictions, investment restrictions, customs restrictions, and direct government intervention FISCAL FREEDOM The top tax rate on individual income and on corporate income Total tax revenue as a percentage of GDP GOVERNMENT SIZE Government spending % of GDP MONETARY FREEDOM The weighted average inflation rate for the most recent three years Price controls INVESTMENT FREEDOM Restrictions in sectors related to national security or real estate Expropriation risk Access to foreign exchange Restrictions on transfers or capital transactions http://www.heritage.org/index/explore.aspx

Heritage Foundation Economic Freedom Rank FINANCIAL FREEDOM Central Bank Independence Freedom of credit allocation Contract enforcement Presence of private financial institutions Foreign financial institutions not restricted PROPERTY RIGHTS Private property guaranteed by the government There is no corruption or expropriation The court system enforces contracts efficiently and quickly. The justice system punishes those who unlawfully confiscate private property CORRUPTION Transparency International s Corruption Perceptions Index (CPI) LABOR FREEDOM Ratio of minimum wage to the average value added per worker Hindrance to hiring additional workers Rigidity of hours Difficulty of firing redundant employees Legally mandated notice period http://www.heritage.org/index/explore.aspx

Economic Freedom The Heritage Foundation 42 The Heritage Foundation 2013 (Frontier Markets Blue, Emerging Green)

Total Scores Source: WDI Database 2013 Human Capital Investment Government Z Score Developed Singapore 0.19 1.13 1.64 2.58 Frontier United Arab Emirates 1.39 0.14 0.99 2.51 Developed Hong Kong 0.66 0.65 1.47 1.46 Emerging China 0.39 1.15 0.11 1.43 Frontier Vietnam 0.57 0.84 0.13 1.28 Emerging Chile 0.09 0.33 1.00 1.24 Frontier Bangladesh 0.32 0.65 0.06 1.04 Developed Australia 0.10 0.29 0.72 0.92 Frontier Mongolia 0.17 1.14 0.54 0.76 Frontier Kazakhstan 0.18 0.37 0.07 0.63 Frontier Mauritius 0.03 0.08 0.38 0.33 Frontier Botswana 0.32 0.24 0.20 0.28 Developed Germany 0.52 0.00 0.67 0.14 Emerging India 0.09 0.23 0.14 0.00 Frontier Namibia 0.13 0.04 0.22 0.05 Developed Japan 0.56 0.02 0.52 0.06 Frontier Ghana 0.13 0.46 0.06 0.28 Developed United States 0.32 0.48 0.51 0.29 Frontier Mozambique 0.04 0.03 0.53 0.46 Developed France 0.36 0.15 0.06 0.58 Frontier Argentina 0.03 0.19 0.43 0.59 Frontier Venezuela 0.29 0.24 0.66 0.61 Developed United Kingdom 0.42 0.46 0.24 0.64 Emerging South Africa 0.01 0.37 0.29 0.66 Emerging Brazil 0.22 0.53 0.36 0.67 Frontier Tanzania 0.00 0.04 0.66 0.70 Frontier Uganda 0.31 0.02 0.37 0.70 Emerging Russia 0.37 0.19 0.54 0.72 Frontier Rwanda 0.11 0.55 0.08 0.73 Frontier Pakistan 0.04 0.66 0.13 0.75 Frontier Senegal 0.39 0.18 0.20 0.77 Frontier Georgia 0.33 0.07 0.37 0.77 Frontier Zambia 0.68 0.27 0.09 0.86 Frontier Cote d'ivoire 0.01 0.94 0.06 0.89 Frontier Ukraine 0.05 0.16 0.95 1.16 Developed Italy 0.72 0.26 0.32 1.29 Frontier Kenya 0.02 0.56 0.77 1.31 Frontier Zimbabwe 0.49 0.05 1.97 1.43 Frontier Nigeria 0.20 0.51 0.73 1.44 Frontier Malawi 0.03 0.75 0.83 1.55 Developed Greece 0.46 0.69 0.54 1.68 Frontier Moldova 0.14 0.66 0.94 1.74 Frontier Swaziland 0.12 1.27 1.04 2.19

2050 Source: Frontier Market Asset Management, WDI Database, 2012

GDP: Now & 2050 Source: Frontier Market Asset Management, WDI Database, 2012

Developed in 2050. GDP pr Capita (PPP) 2010 2050 % Chg GDP pr Capita (PPP) 2010 2050 % Chg Developed Luxembourg $86,124 $194,325 126% Frontier Croatia $19,330 $60,799 215% Developed Singapore $57,932 $171,029 195% Emerging Poland $19,885 $60,686 205% Developed Norway $57,231 $146,906 157% Developed Spain $32,230 $60,630 88% Developed Hong Kong $46,502 $139,481 200% Emerging Russia $19,891 $59,546 199% Developed Switzerland $46,384 $115,844 150% Emerging China $7,599 $58,883 675% Frontier UAE $47,213 $108,523 130% Emerging Malaysia $14,731 $58,825 299% Developed United States $47,153 $102,140 117% Frontier Romania $14,524 $58,813 305% Developed Sweden $39,024 $95,513 145% Developed Italy $31,954 $57,373 80% Developed Australia $38,160 $93,562 145% Frontier Vietnam $3,205 $55,285 1625% Developed Netherlands $42,165 $93,470 122% Emerging Hungary $20,545 $54,483 165% Developed Belgium $37,631 $91,710 144% Frontier Sri Lanka $5,078 $54,112 966% Developed Denmark $40,163 $88,582 121% Frontier Serbia $11,349 $53,521 372% Developed Austria $40,006 $88,529 121% Emerging Turkey $15,687 $52,326 234% Emerging South Korea $29,101 $87,437 200% Frontier Tunisia $9,550 $51,809 443% Developed Canada $39,050 $86,249 121% Emerging Peru $9,538 $51,263 437% Developed Germany $37,402 $82,658 121% Frontier Lebanon $14,069 $51,085 263% Developed Finland $36,473 $81,109 122% Frontier Costa Rica $11,569 $50,423 336% Developed Ireland $40,464 $77,428 91% Frontier Uruguay $14,108 $49,931 254% Emerging Israel $28,573 $77,013 170% Frontier Bulgaria $13,931 $49,657 256% Developed Japan $33,733 $73,848 119% Emerging Indonesia $4,325 $49,468 1044% Developed United Kingdom $35,686 $73,194 105% Frontier Mongolia $4,036 $47,929 1088% Developed New Zealand $29,535 $72,531 146% Emerging Thailand $8,554 $47,401 454% Frontier Panama $13,608 $72,450 432% Emerging Colombia $9,453 $46,959 397% Frontier Slovak Republic $23,303 $69,170 197% Frontier Georgia $5,074 $46,611 819% Frontier Iceland $35,642 $66,570 87% Frontier Botswana $13,893 $44,797 222% Emerging Czech Republic $24,518 $66,425 171% Emerging Mexico $14,564 $44,614 206% Frontier Estonia $20,663 $64,188 211% Developed Portugal $25,416 $43,864 73% Frontier Kazakhstan $12,169 $64,061 426% Frontier Argentina $16,012 $43,282 170% Developed France $34,123 $63,990 88% Emerging Brazil $11,210 $42,353 278% Frontier Slovenia $26,925 $62,993 134% Emerging South Africa $10,565 $39,170 271% Emerging Chile $15,779 $61,398 289% Developed Greece $28,408 $36,791 30% Frontier Mauritius $13,697 $61,188 347% Source: Frontier Market Asset Management, WDI Database, 2013

Gems and Diamonds in the Rough. GDP pr Capita (PPP) 2010 2050 % Chg Asia Frontier Vietnam $3,205 $55,285 1625% Asia Frontier Bangladesh $1,659 $24,162 1356% Asia Frontier Mongolia $4,036 $47,929 1088% Asia Emerging Indonesia $4,325 $49,468 1044% Asia Frontier Sri Lanka $5,078 $54,112 966% Africa Frontier Ghana $1,644 $16,973 933% Africa Frontier Uganda $1,272 $13,052 926% Africa Frontier Rwanda $1,163 $11,194 862% E Europe Frontier Georgia $5,074 $46,611 819% Africa Frontier Nigeria $2,399 $21,849 811% Africa Frontier Malawi $882 $7,413 740% Africa Emerging Morocco $4,712 $38,581 719% Asia Emerging China $7,599 $58,883 675% Africa Frontier Tanzania $1,434 $11,100 674% Africa Frontier Zambia $1,562 $12,081 673% LatAm Frontier Paraguay $5,181 $39,950 671% Asia Emerging Philippines $3,969 $28,823 626% Africa Frontier Cote d'ivoire $1,899 $13,370 604% Asia Emerging India $3,425 $23,903 598% LatAm Frontier Bolivia $4,849 $28,201 482% Asia Emerging Thailand $8,554 $47,401 454% Africa Frontier Tunisia $9,550 $51,809 443% LaiAm Emerging Peru $9,538 $51,263 437% LaiAm Frontier Panama $13,608 $72,450 432% Source: Frontier Market Asset Management, WDI Database, 2012

Market Cap: Now & 2050 Source: Frontier Market Asset Management, WDI Database, 2012

Gems and Diamonds in the Rough. Source: Frontier Market Asset Management, WDI Database, 2012 Est Ann MktCap Growth 2010 50 Frontier Paraguay 21% Frontier Uruguay 17% Frontier Tanzania 14% Frontier Uganda 12% Frontier Costa Rica 11% Frontier Bangladesh 11% Frontier Vietnam 9% Frontier Malawi 9% Frontier Slovak Repub 9% Frontier Zambia 9% Frontier Ghana 9% Frontier Namibia 8% Frontier Nigeria 8% Frontier Georgia 8% Frontier Mongolia 8% Frontier Argentina 7% Frontier Cote d'ivoire 7% Emerging Indonesia 7% Frontier Tunisia 7% Frontier Sri Lanka 6% Emerging Philippines 6%

Optimism Pew Survey Life Satisfaction versus Income. % Satisfaction 7-10 80 Series1 70 Developed USA 60 Emerging Frontier 50 Log. (Series1) 40 30 20 10 Source: Pew Opinion Survey 2007, Ondine Frontier Countries0706 0 $100 $1,000 $10,000 $100,000 GDP/Capita USD

Optimism Pew Survey Optimism versus Income 100 90 80 Mali Bangladesh Senegal India Kenya % Optimistic 70 60 50 40 Pakistan South Africa USA 30 20 10 0 Source: Pew Opinion Survey 2007 $100 $1,000 $10,000 $100,000 GDP / Capita

Optimism Pew Survey. "Next 100 Generation Better Off" versus Income 90 80 70 Bangladesh China % Optimistic 60 50 40 30 USA 20 10 0 Series1 Emerging Developed Frontier Italy Japan Log. (Series1) Source: Pew Opinion Survey 2007 $100 $1,000 $10,000 $100,000 GDP / Capita

Optimism: Determination